EXCHANGE RATES FOREIGN CURRENCY RECEIPTS AND THE EXTERNAL BALANCE IN ECONOMIC GROWTH

The exchange rate is a relative price in an open economy that affects domestic prices, the cost of imported inputs, and exporters' competitiveness. However, the effect of exchange-rate movements on economic growth depends not only on their nominal direction but also on inflation, external demand, the composition of imports, and foreign-currency debt obligations. For this reason, a depreciation should not be treated as an automatic stimulus to exports. Some studies find a positive association between a competitive real exchange rate and economic growth, although the result also depends on institutions and the structure of production [1].